Executive Briefings

More Companies Try to Be 'All Things to All People'

Logistics companies are moving away from strategies based either on customer service or cost leadership and toward mixed strategies that attempt to provide both, says Mary Holcomb, supply chain professor at the University of Tennessee. This is one of the findings of the "20th Annual Study of Logistics and Transportation Trends," conducted by the UT and Georgia Southern University.

This trend began to emerge about three years ago, Holcomb says. "From our 2007 study to our study this year, we have seen this strategy of 'being all things to all people' really increase."

The economy is not the major driver of this trend, she says. "We saw a small uptick in 2008 of companies adopting a cost leadership strategy, which was related to the economy, but in the 2009 study that settled back and it didn't really change the underlying trend."

The balance between cost and service is often difficult for firms to find, Holcomb says. "Even with long-time customers, the balance often tilts between the two, which is indicative of a mixed strategy," she says.

Understanding how a mixed strategy will affect other decisions is also hard to predict, Holcomb says. She notes that an analysis of responses to one question in this year's survey provided unexpected results. The question was regarding the number of discrete supply chains that a company operates, Holcomb says. The average across all 764 respondents was 3.16 discrete supply chains. "We analyzed this further to see how the number varied by strategic approach," she says. The assumption was that service-oriented supply chains would operate more discrete supply chains and cost-focused companies would operate fewer, but that was not the case. "In fact, the reverse was true," says Holcomb. "The number of discrete supply chains for service-driven firms was 3.02 compared with 3.21 for cost leaders. Mixed strategy companies had the highest number of discrete supply chains, with 3.35. "Our hypothesis was blown apart," she says. "It seems there are a lot of other factors, such as maturity of markets and product characteristics, that drive the need to have differentiated supply chains."

To view video in its entirety, click here

 

Logistics companies are moving away from strategies based either on customer service or cost leadership and toward mixed strategies that attempt to provide both, says Mary Holcomb, supply chain professor at the University of Tennessee. This is one of the findings of the "20th Annual Study of Logistics and Transportation Trends," conducted by the UT and Georgia Southern University.

This trend began to emerge about three years ago, Holcomb says. "From our 2007 study to our study this year, we have seen this strategy of 'being all things to all people' really increase."

The economy is not the major driver of this trend, she says. "We saw a small uptick in 2008 of companies adopting a cost leadership strategy, which was related to the economy, but in the 2009 study that settled back and it didn't really change the underlying trend."

The balance between cost and service is often difficult for firms to find, Holcomb says. "Even with long-time customers, the balance often tilts between the two, which is indicative of a mixed strategy," she says.

Understanding how a mixed strategy will affect other decisions is also hard to predict, Holcomb says. She notes that an analysis of responses to one question in this year's survey provided unexpected results. The question was regarding the number of discrete supply chains that a company operates, Holcomb says. The average across all 764 respondents was 3.16 discrete supply chains. "We analyzed this further to see how the number varied by strategic approach," she says. The assumption was that service-oriented supply chains would operate more discrete supply chains and cost-focused companies would operate fewer, but that was not the case. "In fact, the reverse was true," says Holcomb. "The number of discrete supply chains for service-driven firms was 3.02 compared with 3.21 for cost leaders. Mixed strategy companies had the highest number of discrete supply chains, with 3.35. "Our hypothesis was blown apart," she says. "It seems there are a lot of other factors, such as maturity of markets and product characteristics, that drive the need to have differentiated supply chains."

To view video in its entirety, click here